World Energy Markets Observatory 2018

Annual report examining the electricity and gas markets in Europe, North America, Australia, and Southeast Asia

Deciphering Global Energy Trends

Economic growth is increasing the threat of climate change. It is triggering growth in global energy demand, which increased by 2.1% in 2017, (compared with 0.9% the previous year) This has made it difficult for countries to achieve the Paris 2015 Climate Accord objective to keep the global temperature rise below 2 degrees Celsius in 2050.

It is now unclear how governments will be able to announce increased ambitions in line with the goal of holding global warming at 1.5 degrees Celsius in 2050.

World Energy Markets Observatory (WEMO) is Capgemini’s annual thought leadership and research report that includes useful insights and trends that every energy and utility player should know about as they plan for the future of their business.

Our 20th edition is drafted mainly from public data combined with Capgemini’s expertise in the energy sector. Special expertise on regulation, climate challenges, and customer behavior has been provided by research teams at De Pardieu Brocas Maffei and VaasaETT.

Electricity and Gas Market Indicators

The current edition monitors the main indicators of the electricity and gas markets in Europe, North America, Australia, and South-east Asia and reports on developments and transformations in these sectors and addresses six main topics that include:

Climate change & regulatory policies

Energy transition

Infrastructure & adequacy of supply

Supply & final customer

Transformation

Financials

Key Findings

Oil prices have increased

Oil prices rose as high as US$80/barrel for the first time since 2014; this represents an increase of nearly 100% since January 2016.

Gas is still a regional commodity

Global natural gas demand grew by 3%, thanks in large part to abundant and relatively low-cost supplies. China alone accounted for almost 30% of growth globally. Gas prices rose in Europe, Asia and North America in 2017, but remained below the 10-year average.

Coal demand and prices are up

Despite being the major commodity least loved by analysts, global coal demand rose about 1% in 2017, reversing the trend seen over the last two years. This growth was mainly due to demand in Asia, almost entirely driven by an increase in coal-fired electricity generation.

The digital revolution is accelerating

Digital adoption has huge potential to decrease costs in the industry and service sector – among others, IoT and Blockchain witnessed progressive adoption. Grids are strongly impacted by the increased share of intermittent renewables and grid operators will strongly benefit from digitization. However, cybersecurity still remains a big concern, but this will not prevent utilities from deploying their digital transformation plans.

Southeast Asia and Australia

Renewables and high-efficiency coal lead the race for new power generation in SEA

Australia is expected to overachieve the amount of cumulative emissions reduction

2017 was a record year for Australia as it achieved more than 1.1GW of total installed capacity

North America

Uncertainty has led to mixed outcomes in action on climate change

Decoupling energy consumption from economic growth continues

Average retail electricity prices had a modest rise

Opportunities exist for new income streams for utilities

Soundbites

“In 2017, a stronger economy meant Greenhouse Gas emissions rose for the first time in several years; as a result of the 2050 climate change objectives may well not be met. The European Union has taken some measures, but they are insufficient to reach a meaningful carbon price, of around €55/ton. For this to be achieved, carbon floor prices would be needed at either regional or national levels.”

Colette Lewiner, Energy and Utilities senior advisor at Capgemini

“We observe Oil and Gas majors playing in the retail and renewables markets with significant resources and ambitions. Meanwhile, the Utilities landscape is changing fast. All segments of the value chain are impacted by digital transformation, from client relationships and operational processes, through to grids and interactive services, with a huge potential to decrease costs. Legacy players need to accelerate their transformations and step up their focus on new service-based business models as competition from different domains including new entrants, oil majors, retailers, and GAFAM, is increasing.”

Perry Stoneman, Head of the Energy, Utilities & Chemicals sector at Capgemini